NY - Bonus Depreciation

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Federal "Bonus" Depreciation

In March 2002, the Job Creation and Worker Assistance Act (“JCWAA”)(P.L. 107-147) was signed into law. The foundation of this new legislation was the allowance of “bonus” depreciation (IRC Sec. 168(k)). The new “bonus” depreciation provisions provide a special depreciation allowance for qualified properties placed in service after September 10, 2001 and before January 1, 2005. These provisions allow 30% of the asset's cost to be immediately deducted in the initial year the property is placed in service.

Qualified property which is eligible for “bonus” depreciation must have a recovery period of 20 years or less and can not be considered IRC Sec. 197 computer software.

In May 2003, the Jobs and Growth Tax Relief Reconciliation Act (“JGTRRA”)(P.L. 108-27) was enacted. This act modified the “bonus” depreciation provisions contained in the JCWAA by increasing the deduction from 30% to 50% of the assets cost for property acquired and placed into service after May 5, 2003, and before January 1,2005. This modified provision can be applied to all property, which qualifies for the 30% “bonus” depreciation deduction.

State conformity to the federal “bonus” depreciation provisions provided by the JCWAA and JGTRRA is a major concern for taxpayers, as many states have decoupled in whole or part from these federal tax acts.

NY State Conformity

New York does not conform to the “bonus” depreciation provisions, except with regard to qualified resurgence zone property and qualified New York Liberty Zone property. New York taxpayers are required to add-back the amount of federal “bonus” taken to the extent it exceeds the amount of depreciation allowed if the property did not qualify for the “bonus”.

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